Business & investing
NPV Calculator
NPV tells you whether a project earns more than your required return. A positive NPV means it does. Enter the upfront cost and the cash you expect back at the end of each year.
Your result will appear here.
How it's calculated
Each year's cash flow is divided by (1 + rate) raised to the year number, which turns it into today's money. NPV is the sum of those values minus the initial investment.
The profitability index is the present value of the cash flows divided by the investment. Above 1 means the project pays back more than it costs, in today's money.
NPV = −Investment + Σ CFₜ ÷ (1 + r)ᵗ
How to do it in Excel
Excel's NPV function treats the first value as arriving at the end of year 1, so the upfront cost has to be added separately:
=NPV(10%, B2:B6) - B1- Initial investment in B1, cash flows for years 1 to 5 in B2:B6.